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Digital transformation will shape 2016

IDC reports that in the coming years, the biggest focus for businesses will revolve around digital transformation. But enterprise leaders will need to stay focused on agility, rapid growth and scale in order to stay competitive.

According to IDC, the biggest issues in IT leadership will center on business needs, capabilities and availability related to digital transformation. The data shows that two-thirds of CEOs plan to focus on digital transformation strategies for 2016 and that CIOs will be major players in leading every department through this shift. In terms of capabilities, only 25 percent of CIOs report feeling confident in how they are driving new digital revenue streams. When it comes to availability, CIOs are focused on legacy IT services and how to maintain them with limited budgets, while also increasing digital transformation within the business.

In order to accomplish these goals and maintain success in the coming year, businesses will have to focus on innovation, integration and incorporation, according to IDC. That includes implementing cross-functional partnerships, investing in new technology and fostering a culture of innovation within IT.

Leading in 3D

Rapid change can be difficult within IT, which is traditionally not as flexible as other departments and CIOs often find it challenging to meet the demand for fast innovation. As the study points out, CIOs "manage an IT environment built on generations of businesses and technology changes." But digital transformation requires agility and flexibility, even in the wake of long-standing tradition.

IDC cites data from a 2015 SIM IT Trends study, which included 486 CIOs out of 1,218 SIM members surveyed. The study reported that IT has become more centralized with greater funding around agility and innovation, yet it also found IT leaders are still mostly focused on things like security and skills shortage. To remedy this, IDC suggests a "leading in 3D" approach, which it states is a "three-dimensional approach to leadership: creating and facilitating transformation at the speed of business needs while developing an architected, flexible, secure and reliable foundation for the future." This concept of leading in 3D focuses on integration and will allow CIOs to move towards the much needed shift in how they view IT.

New digital revenue streams

IT isn't the only department experiencing a shift due to a digital transformation. As more third-platform technologies become available, it's becoming a challenge for businesses to stay competitive. IDC cites the example of the auto industry, as connected cars have created platforms for new data services, custom cars and even autonomous vehicles that can help with delivery and transport. As the auto industry adapts to this change, it will have to look at third-platform technology to meet customer's needs. According to the IDC study, "One-third of the top 20 firms in industry segments will be disrupted by new competitors within five years," and that it's a matter of "transform or perish."

IDC suggests that businesses focus on acquiring new talent and skills and recommends making time to understand and adopt emerging technology. The study also mentions that when building platforms and services, businesses need to avoid being redundant and that they should focus on building "plug-and-play services that enable new digital products and services." Ultimately, IDC predicts that by the year 2018, 35 percent of IT resources will go directly to creating and implementing these new digital streams within the business.

Data Governance

Information has become a valuable resource for companies, and IDC predicts that by 2017, 80 percent of CIOs will have a plan in place centered around using data to drive the business past its competition. Maximizing the effectiveness and profitability of data will become a driving factor for businesses in the coming years. The study found that currently, more than 70 percent of organizations that have data valuation processes in place are, for the most part, collecting and analyzing that data manually. Businesses will want to look at ways to shift from a manual process to something that is more automated as data starts to overwhelm the enterprise.

Although the study found that 95 percent of CIOs report that they believe data is impacting how organizations conduct business, 68 percent also said they had a difficult time finding stakeholders who viewed data management in a progressive way. This has led to issues with improper data management, ultimately leading to mistakes stemming from inaccurate data, according to the study. Ultimately, these errors contribute to poor regulations, customer experience and strategic decision making.

The solution to fixing gaps in data management, says IDC, include establishing an information governance framework and holding executives accountable to its progress. Companies also need to find a way to marry traditional business intelligence with the emerging trend of analytics and information.

Digital transformation collaboration

While digital transformation is crucial to the growth and success of businesses, IDC predicts that by 2018, "70 percent of siloed digital transformation initiatives will ultimately fail because of insufficient collaboration, integration, sourcing or project management." They also report that in the coming years, businesses won't have a firm grasp on how to foster innovation around digital transformation, which might create internal competition between CSOs, business leaders and IT to gain ownership of innovation. While some initiatives will succeed, issues will arise when multiple business units set out to foster innovation through third-party vendors, new hires and outsourced projects.

As the study points out, it's impossible to lead a successful IT transformation without support of digital transformation from management and executives. In order to have successful innovation and digital transformation in a company, leaders need to encourage cross-functional collaboration around digital initiative. IT departments will also need to use the "maturity it has achieved in agile project management, integrated service management and enterprise security to support the transformation engine," according to IDC.

Experimentation, speed and quality

Up until now, IT has remained slow to change and hasn't developed realistic expectations around the amount of money, time and energy that needs to be invested into software development projects, according to IDC. But, "by the end of 2018, 90 percent of IT projects will be rooted in the principles of experimentation, speed and quality."

The study points to the agile methodology, which is aimed at offering a streamlined development process for every department involved. However, research suggest companies aren't using agile to its full capabilities, perhaps out of a general fear of rapid change. But the study says that those companies that don't overcome this fear will not thrive and that businesses need to create processes to ensure projects are completed at the right speed. These process need to be established based on "feedback, change and continuous adaptation for moving toward business objectives, which themselves expected to change as digital disruption becomes ubiquitous," says IDC. The focus in the coming years needs to be on increasing the pace of change while maintaining quality.

Contain and control security

Security is a hot topic as data breaches grow increasingly common and as the enterprise relies on technology to mine data. But in recent years, most companies have used a Band-Aid approach to security, where strategies are centered around protecting systems and defending them against attacks. However, IDC predicts that this will shift by 2016 and that "70 percent of IT organizations will shift their focus to advanced "contain and control" security and away from a perimeter mentality," according to the study.

This shift will rely heavily on predictive analytics to help build a new security strategy in IT through a combination of traditional and cutting edge approaches, according to IDC. By evaluating risks, IT departments can allocate the proper resources when it comes to security measures. IDC refers to it as a holistic approach that will need to span across business, information, application and technology domains.

Rationalization

Data collection can be overwhelming, but not all information that a business collects is useful or worthwhile. And, alternatively, a lot of data remains underutilized due to a lack of IT support, according to the study. IDC predicts that by 2016, "75 percent of CIOs will have to revive rationalization initiatives to simplify the IT environment and enable innovation." By rationalizing IT's approach to data, businesses will be able to leverage data in more effective ways and even cut costs in the process.

In the past 10 years, IDC says companies have mostly focused on rationalization around applications and infrastructure, and data was more or less ignored. But with this looming shift to digital transformation, companies need to take the focus away from back-end systems and reduce complexity through data rationalization strategies.

Strategic architecture

While much of the focus in the coming years will be on rapid change, companies still need to consider the impact of these newly developed services and products. IDC says businesses will need to focus on "consistency across all channels" in order to successfully compete in the next few years. Essentially, change equates to cost, as departments, infrastructure and processes change within the company. "If unchecked, the bad old days of out-of-control cost, complexity, fragility, and worse, inconsistency will return with a vengeance," according to the IDC report.

Even though this will be vital to the survival of most businesses, IDC predicts by 2017 "60 percent of digital transformation initiatives will not be able to scale because of a lack of strategic architecture." To prepare, leaders need to ensure they employ a coordinated approach to support digital transformation to ensure speed and agility in this phase. It will require a competitive attitude around speed, availability and streamlined process to adopt new technologies and services in the enterprise.

Crowdsourcing

Crowdsourcing has become commonplace as groups leverage technology to collectively source knowledge and, sometimes, funding. But crowdsourcing hasn't reached the enterprise, says IDC, and that's a problem. In the coming years, businesses will need to refocus around collaboration with the use of platforms like GitHub. Luckily, IDC points out that as millennials climb the corporate ladder, this shift will also happen naturally as they encourage IT organizations to adopt this new mentality.

The shift will happen quickly, with IDC predicting that by 2018, "80 percent of development organizations supporting digital transformation will incorporate collective genius and crowdsourcing into their projects as a regular practice." By embracing collaboration at this level, it helps foster an open environment and a collaborative company culture. Leaders will need to ensure they "create a center of excellence to provide leadership, support, tools and measure progress," according to IDC.

Business services

As more businesses adopt third-platform applications, products and services, IDC says that leaders should expect to move from building and creating services to buying and integrating services. IDC predicts that by 2017, "40 percent of services managed by IT will be business services oriented to augment experience and smart products."

Drivers of this shift will include cloud services, interconnected ecosystems and the "merging of real life with digital identity," according to the study. The future of business services will no longer focus on improving operational process, but instead it will become focused on integrating new digital products. But as IDC states, businesses need to "be prepared for service provider failure and replacement since one-third of all managed services contracts will fail within five years."